KUCHING: Malaysia’s timber industry is still stuck in the doldrums, affecting exports and timber prices.
In September 2023, the timber industry was still relatively sluggish, according to the monthly Global Timber Index (GTI) report on Malaysia.
“The GTI-Malaysia enterprises reported a decline in timber exports and continued sluggish demand in the domestic building materials market, which led to lower timber prices.
“The enterprises had a strong demand for opening up international markets and increasing overseas orders while also proposing measures such as controlling costs.
“This month (September), the GTI-Malaysia index registered 37.2%, a decrease of 0.7 percentage point from the previous month, was below the critical value (50%) for 11 consecutive months, indicating that the business prosperity of the superior timber enterprises represented by the GTI-Malaysia index shrank from last month, and the contraction expanded a little,” said the report.
As for the GTI-Malaysia sub-index in September 2023, only the inventory index of finished products was equal to the critical value while the remaining 10 sub-indexes — harvesting, production, new orders, export orders, existing orders, purchase quantity, purchase price, inventory of main raw materials, employees and delivery time — were all below the critical value.
Month-on-month, the harvesting index registered 42.9 per cent, an increase of 24.1 percentage points from August and was below the critical value for three consecutive months.
The production index registered 35 per cent, an increase of 7.7 percentage points from the previous month and was below the critical value for 11 consecutive months.
On the other hand, the new orders index registered 36.4 per cent, a decrease of 4.5 percentage points from August and also below the critical value for 11 consecutive months.
Likewise, the export orders index registered 36.4 per cent, a decrease of 2.5 percentage points from August and was below critical value for 11 consecutive months.
The existing orders index registered 31.8 per cent, an increase of 4.5 percentage points from August and also below the critical value for 11 consecutive months.
The purchase quantity index registered 30 per cent, same as August while the purchase price index registered 40 per cent, an increase of 1.1 percentage point from August. Also remained unchanged month-on-month was the delivery time index at 45 per cent.
The inventory index of main raw materials registered 35 per cent, a decrease of 3.9 percentage points from August.
According to the latest GTI report, the main challenges reported by GTI-Malaysia enterprises were high cost of raw materials, slow market growth, shortage of labour and decrease in orders in addition to low timber prices due to low demand for building materials and reduced timber exports and falling prices.
In Indonesia, GTI-Indonesia enterprises reported that the increase in fuel oil prices led to between 30 per cent and 40 per cent increase in logs production costs. And the heavy equipment used for operational activities in the field was not new and tended to be rather wasteful in using fuel oil which added to the burden of production costs.
For some natural forest concessionaires, the report said as fewer orders were coming, log prices were still low in the domestic market, even below production costs.
These enterprises have suggested that there needs to be a policy from the government to improve the supply chain and develop the domestic market. Also needed were efforts to adjust the price of fuel oil.
“To overcome the low prices of logs in the domestic market, it can be done by maintaining the balance of supply and demand for logs by carrying out production activities that are adjusted to the demand from buyers, in addition to proposing a basic reference price for logs in the domestic market so that log prices do not fall too much and become undervalued. Providing incentives for processed wood products sources from sustainably managed and/or legal forests will also help solve the current problems,” suggested the enterprises.
In order to meet the requirements of Japanese buyers for wood pellet products, they suggested companies may focus on the process of implementing the certification, expand infrastructure, including installation of new machines to replace less efficient older machines, and the construction of dedicated export terminals.
